One of the things that we love to look for as we’re reading as many filings as we do are common themes or memes, which as Wikipedia notes are regarded as “cultural analogues to genes in that they self-replicate, mutate and respond to selective pressures”. We picked up on a particularly interesting one as we dove into the 10-Ks that the biggest of the big banks and financial services companies have filed over the past few weeks. Let’s call it the scrutiny meme.
Judging by the 10-Ks filed by Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JP Morgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC), the banks, or perhaps more precisely the executives who run them, seem to feel as if they’re in a giant lobster pot where the heat is gradually increasing.
Bank of America is feeling the most heat, judging by the 10-K that it filed last Thursday. It used the word scrutiny 18 times in its 447-page filing, nearly twice as much as Goldman Sachs, which used the word 10 times in the 356-page 10-K it filed on Tuesday. On the flip side, Citi used the word just twice in its 351-page filing from last week. Still, that’s twice as much as Citi did in 2011, when it used the word scrutiny just once in its filing. Wells Fargo also only used the word twice in its 518 page filing, though it was the only financial services giant to mention the “Occupy Wall Street” protests by name. (As Theo Francis footnoted back in November, the CME Group (CME) became the first financial giant to mention the group in its filings)
But more than the mere use of the word is some of the ways that the banks described this increased pressure in their filings. Here’s a snip from Bank of America’s 10-K:
Public perception of us and others in the financial services industry appeared to decline in 2011. We continue to face increased public and regulatory scrutiny resulting from the financial crisis and economic downturn as well as alleged irregularities in servicing, foreclosure, consumer collections, mortgage loan modifications and other practices, lending volumes, compensation practices, our acquisitions of Countrywide and Merrill Lynch and the suitability or reasonableness of recommending particular trading or investment strategies
Over at Goldman, the scrutiny was mentioned in related to attracting and retaining employees, the idea seeming to be that coming to work each day with a target on your back is a tad bit stressful. Here’s how Goldman described it in the filing:
“Our ability to…retain and motivate our existing employees and to continue to compensate employees competitively amid intense public and regulatory scrutiny on the compensation practices of large financial institutions”
Now maybe it’s just a giant coincidence that many of these giant financial services firms happened to use the word scrutiny as often as they did in their filings. Or maybe these big banks are really starting to feel like the proverbial lobster in the pot. To us, at least, the scrutiny meme seems a bit too coincidental.
Image source: Lobster in pot via Shutterstock
With the big 10-K deadline behind us, we’re starting to look at other key themes we’ve picked up during the filings crunch. Over at footnotedPro, we comb through SEC filings to find what other investors miss. Last year, we called four M&A targets weeks or months ahead of an announcement. For more information about subscribing to footnotedPro, or to inquire about our 2012 M&A report, email Todd Serpico.
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